MCX silver: Why Motilal Oswal sees potential of huge price gain
- Motilal Oswal believes that any such fall should be a good opportunity to accumulate for a 25% upside targeting ₹72,250 followed by ₹80,000 over the next 12-15 months
After couple of action packed years, the year 2021 was kind of a whitewash for precious metals bulls, with both MCX gold and silver giving 4% and 8% negative returns respectively. Even though silver was seen majorly following gold’s trail, brokerage Motilal Oswal said it witnessed the white metal’s restricted gains amidst volatility in base metals.
It expects MCX Silver to trade at ₹80,000/kg over the next 12-15 months. “The volatility could bring the prices to lows of Rs.60,000 followed by Rs. 58,000 also, whereas immediate resistance is at 65,500 and sustained break above same could take the prices higher towards Rs.67,500. MOFSL believe that any such fall should be a good opportunity to accumulate for a 25% upside targeting Rs. 72,250 followed by Rs.80,000 over the next 12-15 months,” the brokerage said in a note.
In short run, Fed’s policy decisions and volatility in Yield and Dollar could weigh on the prices, although rising inflationary pressure, geo-political uncertainties, a push in overall safe haven appeal could be supportive for the silver price, as per Motilal Oswal.
Investors now have an option to invest in Silver ETF’s (recently launched) which, it believes, could also be a supporting factor for metal prices amidst an increase in demand. Currently, there are a few companies who have launched Silver ETF and few other fund houses have applied for the same, awaiting market regulator SEBI’s approval.
The shift towards solar energy is another critical driver that could support silver prices. Healthy purchases from the investment and industrial segments helped silver demand surpass 1 billion ounces for first time since 2015. While some of that heightened demand has been offset by a 6% increase in mine supply.
"Overall, silver with a dual advantage i.e. getting a push from uncertainties and inflationary pressure and rise in industrial demand is supportive for the metal prices. Looking at the Gold /silver ratio and following gold’s trail, some consolidation or pressure for short term could be possible, although that could be an opportunity to include the metal in portfolio with an expectation of a big upside in the prices," the note added.
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